Celent: Customers Not Ready for Big Data

Most of today’s customers exhibit strong dislike for notifications created using personal information, but younger ones show more acceptance.

Big data is a hot topic in insurance, but the majority of customers are not ready for its realities. That's according to a recent report from Celent entitled “Customers Don’t Want to Buy Insurance from Big Brother.” Survey results revealed that the majority of consumers are opposed to receiving messages that incorporate personal data.

In order to better understand consumers’ preferences, Celent sent eight examples of personal notifications that could be created using recent advancements in big data, analytics and social technology. Participants consisted of 2,642 insurance customers throughout the US and UK. A score of 1 indicated they would hate to receive the message; a 7 indicated they would love it.

The notifications were created using a range of information such as geographical location, credit card use, Internet activity, age, DNA data, driving style and personal values. A few examples:

• The area you are about to walk/drive through has seen 14 muggings and 3 violent deaths in the last 3 months, could you take an alternative route?
• We noted you have checked in at a location outside the country, so we have pre-authorized your credit card for use there.
• Given your age and DNA data, you are at risk of exercising too much, please consult with a physician about your fitness plan and request a review of the health of your knees.

“I deliberately picked the messaging because these are all things that technology enables now,” says Craig Beattie, senior analyst at Celent.

None of the eight notifications received a good score, but some were rated much higher than others. The first notification listed above was rated highest at a neutral score of 4.04. The lowest-scoring message, which suggested the company had monitored the customer’s Internet use and suggested gambling addiction, received a 2.39. “We were hoping the answers would be more positive,” Beattie admits.

Analysis revealed that the majority of low-scoring respondents were those in the oldest age range of 55 and above, as well as those who felt they were being criticized in the notification.

However, there was some positive feedback amidst the primarily low scores. Some respondents claimed to want to receive such personal notifications, most of whom were in the age range of 18 to 34. This bodes well for the future, as younger customers in general are more likely to share personal information.

Positive responses also came from those who are active on social media, frequently share location data, or collect or share financial data. Surprisingly, Beattie noted, those with a strong interest in smartphones or technology did not necessarily give higher scores. Rather, familiarity with sharing information was much more likely to lead to positive responses.

The public acceptance of insurers’ personal data use will be gradual, explains Beattie, but he predicts that it will happen over time. “My feeling is that this is something that’s coming,” he says. “The culture is changing; people are getting used to the idea of their data as a personal currency.”

When planning how they will use their customers’ data, insurers should consider how they could balance the value of the data against the perceived cost to the consumer. As demonstrated by tech giants Amazon and Netflix, customers are willing to share personal data in exchange for benefits such as TV show and movie recommendations. Insurers must decide how to pose a similar trade-off.

While health and life insurers have not yet made extensive use of big data, auto insurers are already using telematics to obtain information from policyholders and offer suggestions about driving routes and behavior. Beattie suggests this is the type of data use that is appealing to consumers.

Using big data to send notifications does raise regulatory concerns for insurers, Beattie explains. With telematics, for example, certain states are asking for proof that collected data actually affects users’ insurance. On the same note, consumers also have a right to know what data is being used for and how it’s being dealt with after use.

For now, insurers should use caution when experimenting with personal data and notifications. “It has to be an opt-in service,” Beattie explains.

Kelly is an associate editor for InformationWeek. She most recently reported on financial tech for Insurance & Technology, before which she was a staff writer for InformationWeek and InformationWeek Education. When she's not catching up on the latest in tech, Kelly enjoys ... View Full Bio

As noted, the trick for insurers will be how they deliver the message. Policyholders already are wary of being watched by their insurance company. For instance, many don't want to report a minor fenderbender because they fear their auto insurance rate will be raised. So they are fearful of letting their insurance companies know too much.

Exactly. They'd be using the data basically the same way, it's how it's "delivered" to the policyholder that needs to be rethought. So big picture this is not just about analytics, it's another example of the ways IT and marketing are interacting more closely with each other (or need to).

They definitely can, but they need to ensure that the benefits of submitting customer data outweigh the costs. As the study shows, customers don't want to receive notifications that are critical of their behavior. Instead of saying "you're driving too fast," for example, auto insurers might have more success with a campaign that offers rewards/discounts for good driving.

As Craig suggests, it's going to be important for insurers to communicate the right way with policyholders. Communicating simply "you're driving too fast" or "you're in the path of a storm" defintely is going to be viewed as nagging, or even worse as intrusive Big Brother. But if insurers can use the information to combine the communications with targeted offers -- discounts, expanded coverage, upgrades, expedited processing or maybe even non-insurance benefits such as gift cards, travel vouchers or whatever (not sure about the regulatory issues there) -- there is likely to be much more customer acceptance of and interest in leveraging that kind of info. There's a lot of interest in banking about leveraging capabilities around offers, and I don't see why insurers couldn't do something similar.